RANJA FROMMER
BETWEEN EXPECTATIONS AND EXPERIENCE
— AN ANALYSIS OF POST-MERGER INTEGRATION IN TWO MERGERS
|
ACKNOWLEDGEMENTS|
There are many areas in life which teach you that inde- pendence is an illusion. My post graduate studies and thesis work have been one such area, and with great pleasure have I discovered that now the time has come to express my thanks to the people and organisations that I and my work have depended upon in one form or another during the past five years.
Prof. Claes Gustafsson, a true “Doktorvater”. You possess the ability to inspire curiosity and novel thinking and strengthen one’s belief in oneself. At the same time you are not only capable of giving but a believer in ‘creative space’: one proof of this is the brilliant idea to this book’s cover. This belief enables you to trust and give time and freedom, nevertheless you are there when one needs you. This has been invaluable for me. Thank you.
The study presented in this book is a part of a merger related research project by the Research Group for Project Based Industry (PBI) and Wärtsilä. At Wärtsilä, my special thanks go to Casse Strand and Jussi Heikkinen, who supported this study marvellously all along. In addition, I would like to thank Stefan Storholm for his support. I am grateful to all three of you for many interesting and illuminative discussions covering a wide vari- ety of topics extending over the boundaries of mergers and Wärt- silä. Aslo, I would like to express my thanks to all my colleagues over the years at PBI. The support I received was wholehearted and essential. To my research assistants, Liisa Laurila and Carl Mohn, I am forever indebted. Your untiring contribution and support helped this study and me extensively, and for your loyalty I am most grateful.
I have been lucky to receive attention, encouragement and advice from Prof. Thomas Polesie as well as Minna Halme for this work. Your wisdom has been very helpful, and I thank you dearly. I would also like to thank Sven Modell for his suggestions and help. I owe a debt of gratitude to Chris Grapes for helping me with the challenges the English language poses to a non native speaker. Also, my sincere thanks go to my colleague Alf Rehn for his ‘deadline fearless’ help and assistance in matters of layout.
The work presented here would not have been possible without financial support. I therefore would like to express my gratitude to the following organisations for their support of my post graduate studies: Wärtsilä, Stiftelsen för Åbo Akademi/
Rektors Forskarskola, Stiftelsens för Åbo Akademi Forskningsin- stitut, Fabian Klingendahls fond, the Finnish Work Environment Fund and Svenska Kulturfonden. In addition, I would like to thank Amos Andersons stipendiefond, Sjöfartsrådet Gustaf Erik- sons donationsfond, Dagmar och Ferdinand Jacobssons fond, Åbo Akademis Jubileumsfond 1968, Fabian Klingendahls fond and Stiftelsens för Åbo Akademi Forskningsinstitut for numerous scholarships enabling me to participate in doctorate courses and present my ‘work in progress’ at conferences around the world.
I thank my parents, the rest of my family, and especially Renata and Vern Sawyer for their untiring support, particularly at the times I have withdrawn more or less completely from ‘social life’ and consequently also you. Your understanding is a true bless- ing and more than anybody could ever ask for.
Many dear friends have encouraged me and continuously offered me their friendship over the years, and I thank you all with all my heart. Special thanks I would like to extend to Sabine Char- pentier, Barbro Schauman, Leena Ilmola and Gitta Forsström. You were there for me in my darkest hours. Thank you.
Atanas, my love. Your support of and devotion to me and my work, your selfless patience and trust speak of true greatness.
Words do not suffice to express my gratitude to you.
Last but not least I would humbly wish to express my deepest gratitude to my interviewees and all the people at the former Wärtsilä NSD Corporation, now Wärtsilä, who where kind enough to give their time and support to this study. Without you, this study would not have been possible at all.
I dedicate this work to all people at Wärtsilä.
Helsingfors, 24.10. 2001 Ranja Frommer
| CONTENTS |
I. INTRODUCTION 1
II. PREVIOUS RESEARCH
INTO MERGERS 33
III. EMPIRICAL DATA AND
THEIR ANALYSIS 87
IV. WÄRTSILÄ 93
V. WÄRTSILÄ DIESEL &
STORK-WERKSPOOR DIESEL 101
1 |
INTRODUCTION GROWTH HAS BECOME an essential part of business and company life in these times driven by shareholder value, stock exchange indexes and ‘globalisation’. Mergers are one means a company can utilise in order to expand and internationalise. Com- pared to organic growth, mergers and acquisitions can, for exam- ple, provide instant market presence and local know how. Also, competition in a particular market can be reduced by merging with competitors. The increasing number of mergers and acquisi- tions undertaken annually world wide and the acceleration of the global ‘merger boom’ could be partially explained by the advan- tages the merger seems to have over organic growth.However, whether a merger generates added value for the acquirer is disputed by and large. News on mergers that have become more costly to the acquiring company than initially antici- pated or budgeted seems to be more of a tacit rule than surprising.
Often, the merged company seems to end up being worth less than the combined companies’ worth before the merger. Thus, many mergers are said to ‘fail’.
A stream of studies has shown that corporate mergers have even higher failure rates than the liaisons of Hollywood stars.
(The Economist, July 22nd, 2000)
Some could be considered to fail visibly, others apparently more ‘behind the scenes’. The predictions for many mergers, espe- cially very large and publicised ones, tend generally to be more on the dim side of future outlooks. One rarely reads or hears about highly successful mergers. In that respect mergers suffer from ‘bad publicity’. By and large, their reputation seems to be poor in terms of whether or not they constitute a justified measure of organisa- tional growth, internationalisation etc. Yet they are continuously
negotiated and implemented and thus seem to be, if not well- liked, then generally accepted nevertheless.
The merger is not an entirely contemporary phenomenon.
In the United States there was already a wave of mergers at the turn of the last century in the electrical utility, steel and railway industries. A second wave occurred before the great depression at the end of the 1920s, mostly in the food, chemical and mining industries. The next merger wave in the US took place during the 1960s, continuing until the early 1970s. During those years the large, diversified corporation was created; it bought smaller com- panies in order to venture into new businesses. Also especially air- lines merged during those years. Another wave after this followed during the late 1970s, lasting all through the 1980s. The corporate acquisitions became more varied and the hostile takeover marched into the arena of acquisitions as a more widespread phenomenon.
In 1988 the number of acquisitions in the US had doubled com- pared to 1968. (Helsingin Sanomat, 23.7.2000, section C3)
The merger wave we are now experiencing is said to have started in 1995 and has been called the first world wide merger wave, with more and more mergers originating in Europe. In 1985 70% of all mergers world wide still came about in the US. But in 1999 European companies had doubled the number of merg- ers just from the previous year. The number of acquisitions in the whole world worth MFIM 32 or more was 8700 in 1999. (ibid.) According to Angwin and Savill (1997), cross border acquisitions within Europe have increased fivefold from 1985 to 1995, their value rising from £2 billion to £20 billion in the same years.
The current wave seems to have a number of ‘initiators’;
an unusually long period of economic growth, globalisation, the internet, the interests of investment bankers and the liberalisation of markets. (Helsingin Sanomat, ibid.) The boom in stock markets has made it possible for many corporations to use their stock in acquisitions, thus avoiding debt financing and making deals easier to carry out. (Harari, 1998a) The number of mergers is also rising
now because, for example, technology companies buy other tech- nology companies in order to acquire human resources. (Hel- singin Sanomat, ibid.) In addition, merger and acquisition activ- ity is argued to be connected to the volume of trading in the stock market, which in turn increases during times when signifi- cant amounts of new information are generated and unexpected changes in economic conditions take place. These in turn multi- ply the diverging opinions on future prospects. (Golbe and White, 1988)
What makes the merger such a seemingly popular measure for organisational growth, internationalisation and globalisation?
The ones benefiting from mergers are, apart from outside institu- tions involved in making the deals, the sellers and the shareholders of the acquired company, because the company is often sold at a premium. (Helsingin Sanomat, ibid.) An acquirer’s benefit from a merger might be the survival of the company, or gaining valuable resources.
There is another dimension to mergers, however, apart from the purely financial side. The merger is a form of organisa- tional change where many aspects of organising and ‘doing busi- ness’ come together in an accentuated way. This makes it not only an interesting phenomenon to study as such regarding all its differ- ent facets, but also a useful setting for studying organisational life and one or the other of its many aspects. This duality of mergers as a research subject or setting is fascinating in its complexity. As Santala (1996), for example, points out, the post-merger integra- tion process as a phenomenon is highly complex and extensive.
Additionally, it evidently is as all encompassing as organisational life generally. This will to some extent be evident from the review of previous research into mergers and post-merger integration in chapter II below.
The so called ‘human side’ thus seems to play a signifi- cant role in mergers and post-merger integration. Mergers can take their toll in terms of employee turnover, for example, or lead to a
continued division of the staff of a company in inherited ‘camps’
stemming from times before a merger. This is hardly surprising to anyone acquainted with the phenomenon merger or acquisition generally. As Löwstedt (1995b) points out, a formal change in an organisation (such as a merger) does not necessarily mean that the organisational members’ way of working will change due to resis- tance to change, for example. On the other hand, a change in an organisation, whether planned or not, can introduce new patterns of interaction, a reorganisation of structures. (ibid.)
This study focuses on problem areas of mergers and post- merger integration, and special features and underlying dynamics of these problem areas. This study is particularly about a Finnish engineering group operating globally and two of its mergers. The specific focus of this study will be accounted for in detail in the next section.
PURPOSE OF THE STUDY THISSTUDYIS based on the following research questions:
1. What kind of problem areas can arise during post-merger integration after a merger?
2. What seem to be possible causes of these problem areas?
3. What kind of a role do expectations play in post-merger integration?
4. What seems to influence merger related expec tations?
The research questions introduced above are admittedly general in nature. Also, they did not exist in the form presented here at the beginning of this study. Rather, they developed and
changed over time, specifically the two latter research questions.
This is not uncommon within qualitative research. Qualitative research tends to be unstructured and to start out from loose con- cepts and ideas in general, in order to capture people’s perspectives and interpretations. (Bryman, 1989) Analysis emerges over time.
(Dyer and Wilkins, 1991) The identification of the research ques- tion as well as the use of possible constructs from theory can be helpful, but should be assumed to be open to consideration, as the research question(s) may change during the research’s progression.
(Eisenhardt, 1989) The research questions presented above are thus inductive in character, in compliance with the overall nature of this study. Thus, the descriptive and explorative nature of this study does not invite a summarisation of its purpose in neatly narrowed down research questions or hypotheses. (cf. Löwstedt, 1986)
For over one and a half years, from April 1997 until Jan- uary 1999, I studied two mergers with the aim of identifying and mapping problem areas in the mergers regarding post-merger integration. The Finnish diesel engine manufacturer today called Wärtsilä carried out these two mergers. They were not the only mergers of this corporation, but certainly among the most signifi- cant. The first merger studied was between Wärtsilä, then called Wärtsilä Diesel, and the Dutch company Stork-Werkspoor Diesel.
The second merger studied was between Wärtsilä Diesel, the Swiss company New Sulzer Diesel, the Italian companies Diesel Ricerche and Grandi Motori Trieste. All general references to this ‘second’
merger in this study include all these companies, even though it is mostly referred to as the merger between Wärtsilä Diesel and New Sulzer Diesel for purposes of readability and briefness. The case mergers will be described in detail in chapters IV, V and VI, where the empirical data of this study are presented and the case mergers are analysed.
The description of the two mergers, their post-merger integration processes and their apparent ‘problem areas’ serve as
the base of this study. The focus is on stories that were told by indi- viduals involved in the mergers about their experiences of them, in an ‘organisational-researcher-as-a-collector-of-stories-from-the- field’ manner. As organisational research can be viewed as field- story interpreting, the analysis in this study commences to inter- pret these stories from the field. The next step is in turn to tell
‘a story about the stories’, which constitutes the ‘understanding of the text’. (cf. Richards and Richards, 1994, p. 448) The reflec- tive construction of an explanation can thus be seen as being story
‘for and from data’. (idem, p. 449) The ‘narratological’ approach chosen in this study is ‘organisational research written in a story like manner’; i.e. ‘narrating organisations’, typical of case studies.
(cf. Søderberg, 2000) The story told here, with its particular author dependent narrative voice, should be viewed as being one of or ‘alongside’ all other possible stories that could have been told.
(cf. Pentland, 1999) As a tool and medium for research the story has taken a more central role within organisation studies in the past few years. Organisational theory is influenced by a variety of other disciplines, mainly from within the social sciences. The emergence of the story within organisational theory is subscribed to an infusion of literary theory into this genre. (cf. Czarniawska and Sköldberg, 1998)
‘Science’ is closer to ‘narrative’ than one might think.
(Czarniawska, 1997, p. 7)
In the story presented here the focus lies on difficult aspects of the studied mergers as presented in the individual accounts, i.e.
stories. The interviewees’ accounts have been analysed with regard to the ‘problem areas’ of the mergers as well as how interviewees’
experiences corresponded with their evident expectations regard- ing (aspects of) the respective mergers in particular. A detailed account of the research strategy employed in this study as well as the specific path of analysis will be given below in chapter III.
The nature and ‘extent’ of the ‘problem areas’ encountered in the case mergers evidently differed. What they seem to have in common, however, is that they were counterproductive in terms of the integration of the two respective merging companies. Some of the evident reasons, i.e. causes, for the studied ‘problem areas’
are examined in this study in more detail. The results of this study indicate that the expectations people had of the organisational change that they were a part of seemed to play a significant role in how the change process was perceived, experienced and reacted to.
In the light of the research set-up and the research ques- tions guiding this study, it is the purpose of this study to
✓ describe and examine the problem areas that seemed most significant within the studied merg ers and their respective post-merger integration ✓ examine the expectations of a merger and post-
merger integration
✓ examine the role that expectations play in post- merger integration.
This study should be seen as complementary to other organisational research. Its purpose is to contribute to the under- standing of organisations, i.e. to contribute to knowledge of soci- ety in its organising form and to enriching the way organisations are viewed. (cf. Hellgren and Löwstedt, 1997) The role of expecta- tions and ‘evidence’ for their significance will emerge during the presentation of this study. The descriptive and explorative nature of this study requires some patience on this point from its reader, as it follows a story like style and thus needs to be ‘built up’ in a story like manner. The reader needs to be taken through the emer- gence of the findings of this study from its data, as this process is crucial to evaluating the presented findings. In addition, expecta- tions and their role seem to be under-researched in conjunction
with mergers and post-merger integration. Research into mergers and post-merger integration is criticised for being too general and universal at times, and therefore, more focused and less ‘broad brush’ research, (Cartwright, 1998) which focuses on a specific aspect, or ‘intensive sector’ (Santala, 1996) of post-merger inte- gration could be of more use both theoretically and practically.
In other words, research into mergers and post-merger integra- tion could benefit from investigations into specific aspects of a phenomenon or phenomena studied, taking it further into the underlying dynamics of the complexity that seems to characterise mergers.
The examination of expectations and their role in merg- ers and post-merger integration does have a psychological con- notation to it. According to Hellgren and Löwstedt (1997) the application of theories and thoughts from other genres can enrich our understanding of local phenomena such as an organisation and the actions related to it. Also, they consider this infusion to be beneficial in terms of counter acting simple interpretations of phenomena. (ibid.) Also Blomberg (1995) points out that exten- sively studied research areas (such as competence or learning) have benefited from the infusion of phenomenologically inspired per- spectives, for example, as these have introduced new and thought- inspiring results. The academic contribution of this study lies in the psychological colouring of the data analysis. This is, however, not a study in psychology, but continues to be representative of research into organisations, ‘organisation theory’.
The ‘problem areas’ of the case mergers were studied because the focus of this study is on the dynamics behind their birth, on understanding their emergence. This can lead to enhanced understanding for the management of mergers and post- merger integration processes in particular. The knowledge and insight accumulated in this study can be utilised in practice to increase awareness of the human side of mergers, i.e. the people involved in such a change process. Frustration and trauma could
be diminished if not for all then for many parties involved in a merger. This would be in line with what seems to be generally expected of research within organisation and management studies, as it evidently tends to be highly normative. Answers and advice seem to be expected of it regarding practical problems, because of its inclination to search for the improvement of organisations and the actions within them in a more effective direction. (Gustafsson, 1994)
…organizational research is pervasively concerned with the prom- ulgation of practical knowledge. There are other areas in the social sciences which reflect a similar commitment, but a very large pro- portion of organizational studies are directly or indirectly con- cerned with practical issues.
(Bryman, 1989, p. 4)
Also Larsson (1989) sees the analysis of mergers in the light of organisation theory and behaviour as a solution to understanding how the combination of companies could be mediated into per- formance. The pragmatic nature of this study is of importance due to the world view, i.e. the paradigm1 employed to guide this study.
The paradigmatic aspects of this study will be discussed in more detail in the next section of this chapter.
ONTOLOGICAL AND EPISTEMOLOGICAL CONSIDERATIONS IN THE PREVIOUS section, this study’s purpose and focus were described. In order to position it within the world of research, the chosen ontological and epistemological point of departure will be investigated in this section. A chosen ‘theoretical perspective’2 will influence a researcher’s conception of what kind of data s/he finds important in order to capture the ‘essence’ of the phenom-
enon studied, (Eneroth, 1984) i.e. the aspects important to her or him. An account of the pre conceptions of the researcher, i.e. the influences s/he is subjected to, is of importance also in terms of explaining the bias of the study presented. This is significant, as research is not ‘neutral’, and is, as will be discussed below, ‘sub- jective’. Thus, an account of the ontological and epistemological perspectives chosen by a researcher can be viewed as a part of the researcher’s ‘self-reflection’. (cf. Blomberg, 1995) A chosen theo- retical perspective also influences the choice of method, because it influences the researcher’s perception of the world. A chosen method should reflect the researcher’s paradigmatic position. (cf.
Gummesson, 1991, Merriam, 1994) In order to position this study regarding methodological and methodical choices, thus subjectively choosing the employed ‘absolute platform’ of truth (Gummesson, ibid.), the underlying line of thinking and reason- ing influencing this study will be described in this section.
CONSTRUCTIONISM
This study is representative of the relativistic, ‘construction- istic’ and interpretive school of research. Science cannot be sepa- rated from the social, cultural, political and economic environment it operates in; instead, it can be viewed as a social process. Science as a social process requires that science ‘become’ subjective. Science as an ‘objectivistic project’ fails, as there are no facts free from evalu- ation. (cf. Blomberg, 1995) Or at least we as human beings are not able to capture ‘objective reality’ (due to our limited senses). (cf.
Denzin and Lincoln, 1998) Additionally, a researcher cannot place her- or himself outside the society s/he is part of, which contributes to the unlikely notion of ‘objective science’ within the social sciences.
(Alvesson, 1998) ‘Objectivity’ as such is sometimes considered to be ascribed an obscure meaning overall in social sciences; a researcher strives for order and control within her or his research, which evi- dently does not correspond to ‘social reality’. (Alvesson, 1999)
The ‘world view’ adopted in this study is ‘constructionis- tic’, as it is based on the notion of ‘social construction’. We socially construct our individual ‘reality’ (how we perceive, understand and experience the world), create it through our thoughts and our actions (and interactions with other people and ‘the world’, thus
‘socially’). (cf. e.g. Berger and Luckman, 1995, Blomberg, 1995) This implies that there are in fact as many realities as there are people, because everybody has her or his own ‘subjective perspec- tive’, intersubjectively formed. These multiple realities are thus interconnected, as they are not independent of each other, but we are influenced by the ‘realities’ of the people we come into contact with. (Berger and Luckman, 1995) Aspects such as a common his- tory, culture, belonging to a certain social group or the like can, however, influence and bring together individuals’ perceptions of reality. (Hellgren and Löwstedt, 1997) In addition, each individ- ual perspective can be regarded as a ‘fact’, a manifestation of one subjective ‘reality’. (c.f Gummesson, 1991)
As any theory of bearing, the theory of ‘social construc- tion’ has not remained undisputed (cf. Hacking, 1999). Social construction in this study is employed as a basis for capturing individuals’ accounts of their experiences and perceptions and forming a picture from these accounts; every individual has an individual view of her or his reality. This study should not be taken as representative of ‘radical’ social constructionism which claims that everything is socially constructed.3 Berger and Luck- man, for example, did not propose that nothing exists unless it is socially constructed. The belief that everything is socially con- structed seems to spring from another of the common fallacies theories are subjected to; that it is the final and ultimate truth and thus applicable to all and everything. Instead of viewing it as a theory that, once again, brings us closer or increases our under- standing of us and our world (and the way we seem to perceive it), i.e. ‘raising consciousness’ (Hacking, 1999). The view adopted in this study proposes simply that our perceptions and experiences
and the classification of them are socially constructed. (cf. ibid.) This is an important distinction, as it lays the ground for the ‘theo- retical justification’ of this study. Its findings prove relevant within and because of the chosen paradigmatic approach.
The view of science and the world employed in this study limits the choice of study, because it determines the focus in terms of what and how. When the reality we can study is viewed as being made up of multiple individual realities, these realities become a way of understanding (parts of) reality. Thus this study is of a descriptive, explanatory and interpretive nature regarding the spe- cific phenomenon studied in its natural setting and should, in broad terms, be placed in the qualitative school of research. (cf.
Bryman, 1992, Denzin and Lincoln, 1998)
…qualitative research is often claimed to reflect a different form of knowledge in which people’s understandings of the nature of their social environment form the focus of attention… (Bryman, 1989, p. 27)
GENERALISATION
Representatives of a more positivistic and quantitative school of thought might want to question research of this nature along the lines of how a description of a phenomenon could be considered ‘sufficient research’ regarding representation and gener- alisation, etc. However, the meaningfulness of traditional scientific generalisation has been questioned by and large in the context of the social sciences. (see e.g. Alasuutari, 1995, Strauss and Corbin, 1998) Within the social sciences, the human being and her or his social environment is studied. Considering that human beings are unique, all situations and relations they produce are thus unique.
Controlled conditions in a ‘laboratory manner’ are not possible.
The intention is to look at societal phenomena from fresh, unprejudiced, yet well-founded point of view. […] If all readers
of a study can recognize a phenomenon from the description pre- sented, then generalizability is not a problem; the only issue of interest is the relevance of the explanation offered for that phe- nomenon.
(Alasuutari, 1995, p. 145)
Yin (1994) differentiates between two types of generalisa- tion; ‘statistical’ and ‘analytical’. ‘Analytical’ generalisation would be more relevant to case study research, as cases should not be regarded or understood as ‘sampling units’ (unless one was to use the ‘multiple case survey’ employed by Larsson (1989, 1990), for example). Within ‘analytical’ generalisation, the results of a case study are compared to a previously developed theory. This could thus be termed ‘generalisation to theory’ or ‘theory replication’.
This view of generalisation does not seem to take ‘theory building’
into account; developing a novel theory or developing an existing theory further, as is the purpose of this study.
The purpose of using a theory-building methodology is to build theory. Thus, we are talking more the language of explanatory power rather than that of generalizability. Explanatory power means “predictive ability”…
(Strauss and Corbin, 1998, p. 267)
The theory generated is explanatory of and can be applied
‘back’ to the population(s) it was derived from. (ibid.) Thus, it is context dependent. Again, there are two dimensions to gener- alisation; within one, results become generalised due to (a large number of) observations (Yin’s (1994) ‘statistical’ generalisation).
Within the other dimension of generalisation, the identification of certain phenomena requires the comprehensive and in depth examination of the phenomenon in question. The discovered dynamics or mechanisms can then be suspected to exist in similar settings. (cf. Gummesson, 1991) The latter dimension of generali-
sation can be regarded as more suitable for the study of social phe- nomena, social situations, as they are always specific and ‘local’.
Theory becomes local theory; knowledge in a social context arises when one is able to deal with a specific situation. (Gummesson, 1991, p. 85)
As van Maanen (1979) points out, the goal of ‘qualitative methodologies’ (qualitative research) is the description, decoding, translation, understanding (‘coming to terms with’) the meaning of phenomena in the social world. The value of description lies in that describing a phenomenon is a way for us human beings to gain or increase understanding of the phenomenon and through that the world in general, in an inductive manner. Also, doubts can be raised about “a good deal of accepted wisdom”. (Mintzberg, 1979, p. 107) Generalisation from ‘individual’ phenomena presupposes a holistic perspective of ‘reality’, i.e. the interconnectedness of all aspects of life and the world (all ‘qualities’) should be recognised.
Based on the holistic perspective of ‘reality’, knowledge is derived through the examination and understanding of specific aspects (‘qualities’, phenomenon). Generalisation is based on the holistic world view, in which all specific aspects have a qualitative relation to all other aspects. A specific aspect is formed by the whole as an aspect of ‘the whole’ and is thus a concrete, specific expression of its overall, universal ‘quality’. Thus the totality of ‘reality’ can only be grasped through the examination of its specific aspects, which are all representations of ‘the whole’. (Eneroth, 1984) This view also presupposes that knowledge is seen as a form of guidance.
The need to commit to a specific standpoint in relation to ‘reality’
vanishes (Gummesson, 1991) and can, in fact, not be regarded as useful for gaining an understanding about the world or ‘reality’.
According to Gustafsson (1994), ‘reality’ exists partially in the form of similarity and differences, where the differences have a more basic meaning than the similarities. Differences create con-
trast, and contrast is a prerequisite for observations. ‘Reality’ also seems to be a dynamic, continuous and ever changing process.
The observable regularities inherent in this process, ‘underneath’
or alongside its evident chaos, combined with the contrast creat- ing differences, seem to give meaning to the world around us.
Just observing phenomenon without speculating about the conse- quences of or reactions to the observed would seem meaningless.
(ibid.) Science becomes a road of discovery, ever evolving, and is not fenced in as a rigid, ‘eternal truth’ that would have the poten- tial to prevent understanding through prejudice. If one is not out to seek the ‘eternal truth’ but the best possible understanding at the time, the need for generalisation (of the kind described as the first kind above) is reduced. (cf. Gummesson, 1991)
…one can at least learn something about the general and the col- lective by studying the particular and individual. The case stud- ies of the business historian is the equivalent of the zoologist’s observation of one or several individuals, in order to understand what characterizes the species, its way of life and the way it inter- acts with the environment. The phenotype is a source of infor- mation on the genotype. One engine works can tell something about other engine works, about the fundamental features of the branch, and about the international, national or regional business environment that the factory is a part of and must adapt to. (Ped- ersen, 1997, p. 454)
Feyerabend (1999) points out that the mere quest for reality incor- porates a simplification of the world. And even though this quest can create beneficial results, like the revelation of the principles behind phenomena, it simultaneously changes the phenomenon being studied, as it is being simplified either by means of abstrac- tion or experiment. The result of this is then considered to be
‘real’. “Understanding a subject means transforming it.” (idem, p.
12)
It is our understanding that questions within the social sciences cannot be given straightforward answers in a more tradi- tional, ‘scientific’ meaning. Only very abstract, general questions can possibly be answered if they are detached from their empiri- cal, ‘local’ context.
(Hellgren and Löwstedt, 1997, p. 33, translation by the author) Löwstedt’s (1986) study of the introduction of CAD automation and its impact on the organisation and contents of engineers’ work exemplifies the contribution of descriptive research. The comprehensive account of four different companies undergoing the change towards CAD engineering within differ- ent industries and the comparisons between the case companies (i.e. description of the similarities/differences) enable Löwstedt to draw conclusions about the organisational, structural and con- tents wise changes within engineers’ work. The study of the co operative movement in Sweden between the years 1985-1995 by Kylebäck (1999) is also a notable example of the value of descrip- tive and explanatory research. His detailed illustration of the occurrences and both external and internal circumstances of the Swedish co-operative movement leads to an understanding of the transformation of the movement. Furthermore, understanding the movement’s ‘transformatory’ strengths and weaknesses increases the understanding of the dynamics behind such transformations as well as necessary future transformation. Carlsson and Nyblom (1999) also utilise the detailed description of the accounting of credit losses by three Swedish banks to gain understanding of the degree of freedom these banks had in handling their credit losses.
Comparison between the three cases and examination of the legal and industrial environment of Swedish banks within the given time frame of the study give the researchers (ibid.) a sound base for both critical interpretation and comments on the subject of study. E. Wikström (2000) follows this research set-up as well;
a description of two projects and the communication processes within the projects’ groups serves as a base for interpretation
through comparison of the two cases as well as theory on projects and communication.
In addition to giving an empirical view of increasing the understanding of the world we live in through describing, explain- ing and predicting phenomena, science can seek to improve the social well-being of individuals or groups by useful means for doing so. In that sense the pragmatic nature of this study from its outset should not be overlooked, as it has had a strong impact on its course and nature. Due to the pragmatic approach taken in this study, the overall theoretical perspective also holds teleo- logical elements. The data that have been significant in this study are related to the ‘survival’ of the phenomenon studied in both a problem solving and problem creating perspective. (cf. Eneroth, 1984, Gummesson, 1991) The empirical data are the primary basis of this study. Following Gustafsson (1994), this study would partially fit the genre of ‘consultancy research’4; practically gener- alising research based on case stories from praxis, also called ‘tales from the field’. Due to the pragmatic approach chosen in this study, it could be assigned to the functionalist paradigm of acquisi- tion research. (cf. Kleppestø, 1993, Morgan, 1990, Risberg, 1999) It should be pointed out, however, that this study is not based on the belief that every aspect of a post-merger integration process can be controlled (with the appropriate tool). Instead, the underlying belief is that the process can be eased and made more satisfactory than what seems to be the case in many mergers, mainly through understanding the fundamental nature of this kind of organisa- tional occurrence. This view, again, holds elements of the interpre- tive paradigm.
SYMBIOSIS
When viewed from a ‘symbiotic perspective’, this study carries ingredients from the functionalist, the interpretive and the radical humanist paradigms that, among others, appear within
organisation studies. (Morgan, 1990) The assumptions their respective world views are based on, are often taken for granted.
(Morgan, 1980) Due to the pragmatic nature of this study, the generation of useful perspectives, models etc. in the pursuit of improving organisational life becomes attractive. Improving organ- isational life involves the notion of making it more effective and efficient in order to generate (more) profit. Whether or not the current dominant functionalistic definitions of effectiveness and efficiency prove to be sufficient and applicable in the long run, however, remains to be seen.
Within the functionalist paradigm of research, the ‘mir- roring’ function and generation of problem solving means can emerge as useful. ‘Mirroring’ enables organisations and organisa- tional members to see and assess themselves through the ‘detour’
via research, before moving on to the possible implementation of problem solving means. Usefulness in this sense becomes a very attractive characteristic of knowledge and is in accordance with the pragmatic approach of this study.
The interpretive paradigm of research, on the other hand, is valuable in its focus on change. The social world is a socially constructed network of symbolic relationships, never static but always ‘in movement’. For an organisation, this includes not only life ‘within it’, but also its environment. In this paradigm, under- standing this network and its existence constitutes the purpose of research. This corresponds with the descriptive nature of this study; understanding the world through describing aspects of it.
This is the case especially when the purpose of description is to gain insights through discovering new ways of perception of a phenomenon (situation, occurrence, person, etc.). The gaining of insights can be viewed as having an objective: foremost the expres- sion and development of our nature as human beings. Within the radical humanist paradigm this is one of the main interests of research. The realisation of this objective is sought through under- standing how we as human beings construct our world, so that
we can control our own constructs. In an organisational setting, this could be a reciprocal action in which the development of an individual could be furthered through the organisation s/he ‘takes part’ in; the organisation could in turn evolve from the developing individual.
Within research coloured by radical humanism, numer- ous organisational occurrences should be recognised as manifesta- tions of deep psychic processes. These processes are complex and difficult to understand, and insights into the mere existence of these processes can further the understanding that they are pow- erful forces influencing organisational life, also from an effective- ness standpoint. (cf. Morgan, 1980 and 1990) This awareness can be beneficial to the examination of such a complex organisational change process and a merger and its post-merger integration.
The symbiosis between the results oriented focus of the functionalist perspective combined with the world-view of an interpretative approach could be beneficial; through understanding the world as socially constructed by individuals, it should neverthe- less be possible to improve some circumstances and experiences.5 A symbiosis of these perspectives seems possible, because accord- ing to Morgan (1980), the different approaches share ‘common fundamental assumptions about the nature of the reality they address’. (idem, p. 608) The benefits of a symbiosis between differ- ent paradigmatic perspectives could also work against ‘digging the same hole deeper’, i.e. applying and repeating an established way of thinking and related method in what could be termed ‘slum- bering duplication’, (Gummesson, 1991) and enhance the devel- opment of the social sciences, for example. Also, the risk of the emergence of dogmatic and counter-productive points of views could be diminished. (Hellgren and Löwstedt, 1997)
…the acquisition of new ways of thinking depends upon a depar- ture from the old world view.
(Morgan, 1980, p. 605)
Descriptive and explorative research could be considered to benefit from ‘fresh views’, consequently, the symbiosis of these approaches was considered beneficial to this study. Now it is time to describe and discuss the method employed in this study.
RESEARCH STRATEGY
…I am neither a priori for nor against any methods. If they are not suitable, it is hardly scientific to provide one sided support for one or another method… (Gummesson, 1991, p. 3)
I FULLY AGREE with Gummesson on this point. In the previous section the overall aim of this study as well as its under- lying theoretical point of departure, i.e. research paradigm, have been accounted for. Now follows the description of the method employed in this study to examine the problem areas of the two examined mergers, their possible causes and explanations as well as the process of analysis employed. The method chosen influences (the interpretation of) a study. The awareness of and report on the strengths and weaknesses of a method used in a particular study facilitates reflection on the suitability of the method chosen as well as the evaluation of the findings presented in the study.
The method chosen to tackle the research problem described above is through a case study. This is one of the most traditional methods within qualitative research. (cf. Norén, 1998) One case company and two of its mergers were chosen. This method was considered to be suitable in order to study the experi- ences of people within a change process like a merger. It provides a detailed view of (in the end) one organisation and the people within it. Gummesson (1991) points out, that case studies are well suited for the study of processes in organisations and permit a holistic view of a process. The examination and understanding of
the dynamics within a single setting, as well as descriptive, explor- atory, explanatory and theory building research is argued to be a suitable application of the case study. (Eisenhardt, 1989, Merriam, 1994, Yin, 1994) Additionally, a specific case can be viewed as a concrete expression of an overall phenomenon. (Eneroth, 1984) Thus the case study method complies with the overall nature of this study; studying current phenomena within their environment, (cf. Yin, 1994) i.e. post-merger integration within a particular organisation.
Larsson (1989) argues that the case study method is more suitable than a questionnaire survey to gain the trust and involve- ment of the research ‘object(s)’. It can often pose difficulties to gaining access when studying social settings (like organisa- tions) in general, (see e.g. Bryman, 1989, Punch, 1998) which can partly depend on the method deployed. (Gummesson, 1991) When studying mergers and pre and post-merger activities, gain- ing access can be particularly intricate, because of the privacy, secrecy and delicate nature of the information that is sought out.
(Cartwright and Cooper, 1993b and 1990, Larsson, ibid.) Case studies can be viewed as what Evered and Reis Louis (1981) call
‘inquiry from the inside’, characterised by the intention to under- stand (the studied subject) as well as the absence of analytical cat- egories from the outset of a study. The degree of involvement, i.e. ‘how inside’ the researcher is, can naturally vary. However, the closeness to the subject as well as the lack of well-defined precon- ceptions might be one of the characteristics of the case study that kindle the trust of the subject(s) to be studied. The more intimate and detailed nature of a case study method was thus considered advantageous for this study.
…case studies may sometimes be more attractive to practising managers, since their closeness to detail and familiarity with ongoing organisations can be more meaningful to them than the proaccupation with often abstract variables that characterizes much quantitative research. (Bryman, 1989, p. 178)
Qualitative methods within the social sciences per se are argued to comprise closeness between the researcher and her or his material. (Gustafsson, 1994) Additionally, a case study approach is argued to be specifically applicable when the phenomenon to be studied is largely unknown, when existing theory seems inad- equate or when a new, fresh perspective is needed within existing research. Also it is supposed to suit the study of long term change processes. Other strengths of the case study method include the opportunity to contrast conflicting realities, which can diminish
‘researcher bias’, as thinking can be widened from earlier precon- ceptions. In addition, the results of a case study are likely to be empirically valid. (Eisenhardt, 1989) These strengths of the case study method suit the initial pragmatic approach of this study.
Overall, the case study approach with its differing ‘sub types’ seems to be popular among researchers for studying mergers and post- merger integration and different aspects of them. (e.g. Lohrum, 1996, Meyer, 1996, Risberg, 1999, Santala, 1996, Vaara, 1999)
A case study is considered to have several characteristics:
rich, detailed and ‘multi aspect’. (Larsson, 1989 p. 44) The rich- ness or thickness of description within case studies is advocated, because it provides for one of the strengths of case studies pro- moted by Dyer and Wilkins (1990): providing a story against which other researchers can compare their own results and thus gain theoretical insights. Additionally, rich descriptions of case studies can provide an ‘aha’ experience of understanding by unveil- ing the dynamics of the described phenomena. Also, they can provide opportunities for identification with the phenomenon or specific features of it, (idem) which could enhance understanding and the generation of an ‘aha’ experience.
A case study approach is also seen as suitable for theory testing (Eisenhardt, ibid.) and detailed descriptions of case studies can be utilised for the fine tuning and modification of hypotheses (Jordan, 1995), but this has not been an objective of this study. As the initial aim was to examine the problem areas of post-merger
integration and their possible causes, leaving space within this frame for discoveries, the accounts of organisational members around issues related to the merger they were experiencing were examined and analysed.
Comparability and single versus multiple case studies need to be considered when discussing the case study method. Dyer and Wilkins (1991) and Eisenhardt (1991) debate the sufficiency of single case studies. Dyer and Wilkins consider multiple case stud- ies to suffer from a deficiency regarding context and deep structure in exchange for the creation of constructs usable in a more tradi- tional theory testing manner. (cf. also Pentland, 1999) The debate includes the question of whether single case studies really are single case studies. The importance of this point lies in the fact that this dissection provides for the necessary comparability between ‘cases’, which is argued to be a prerequisite for deriving any kind of results within this research method. (Eisenhardt, 1989, 1991, Dyer and Wilkins, 1991) The comparison, however, is made within one organisational context, thus providing an understanding of one setting and its details. According to Dyer and Wilkins (idem.) this allows for the emergence of underlying dynamics and less obvious features of the ‘object’ studied.
In this work the case study is a single or multiple case study, depending on the terms of classification used. As mentioned above, this case study consists of one case company operating in one specific industry. As a ‘case’ can comprise an entire organisa- tion or departments or sections within an organisation or even within inter organisational networks, (Bryman, 1989) the differ- ent mergers and their affected units can likewise be considered their own separated cases with their own context and history. This study could thus be argued to consist of some 8 cases. Neverthe- less, whether or not comparability is necessary in a case study could as such be argumentative. In a study like the one presented here, comparability seems of lesser significance, as the purpose of this study is to enrich the understanding of the phenomenon studied,
the human side of mergers and post-merger integration. In this sense this study should not be viewed as comparative, but rather as complementary: an enrichment of the understanding of a phe- nomenon. Enrichment ventures into the depth of a phenomenon.
Following this line of thinking, Mintzberg’s (1979) question on what would be wrong with samples of one seems adequate. One has to adjust the case quantity, sample and comparability question to what is being studied. (cf. idem)
As to the sufficiency of case studies, they have suffered from a perceived lack of generalisability. The concept of generalisa- tion was, however, already discussed above in broader terms (not particularly narrowed down to case studies per se). The previous discussion is valid in the context of the case study as well; statistical generalisation is not of interest, as it seems to lie in a positivistic and statistical perspective in which a case is seen as a sample of one.
This is not in compliance with the general nature of case studies, which foremost should provoke insight of theoretical importance in the form of discovering patterns and linkages. (Bryman, 1989) Thus generalisation is interesting only in its context dependency, in being applicable to the studied (or similar) population(s).
The gathering of data in this study has not been confined to narrow areas of research. Instead, all data that have seemed relevant to the broad overall aim of this study − the mapping and examination of problem areas related to the studied mergers and their respective post-merger integration processes − have been gath- ered. Vulnerability to ‘chance’ and subjectivity are disadvantages of this kind of a method. On the advantageous side of this kind of a method lies the potential to make discoveries. (cf. Bryman, 1992) The potential to make discoveries again would be limited (or enhanced, perhaps?) by the pre-conceptions of the researcher.
Social and cultural heritage and possible theoretical choices influ- ence a researcher’s pre conceptions or pre understanding, from which a researcher is assumed never to be completely free. (see e.g.
Blomberg, 1995, Gummesson, 1991, Strauss and Corbin, 1998)
The consequences of a researcher’s pre conceptions are that data gathering can be directed towards areas and themes corresponding to her or his frame of reference. The dialogue between Eisenhardt (1991) and Dyer and Wilkins (1991) on the strengths and weak- nesses of a rigorous or ‘free’ methodology highlights the pros and cons of both approaches in a case study setting. The advantages of research according to a methodologically sound research plan versus research utilising some kind of tabula rasa approach are dis- cussed. One side is accused of not being open to new, unexpected aspects that might emerge. The other side, again, is subjected to the accusation that only telling a story is not enough and has never led to grand contributions to theory.6 Nevertheless, Eisenhardt (1989) does point out that being theoretically too ‘constrained’
from the beginning would act as a counter to chance. She contin- ues with considering that serendipity could be an important fea- ture of discovery. In light of the results of research that is aimed at building theory, ‘accidental’ findings could thus be advantageous.
(ibid.) Restrictive research methods are also criticised for inhibit- ing the exploration of social settings, which are evidently complex by nature. (Punch, 1998)
The dilemmas for those working within the qualitative tradition are very clear. The elaboration and application of theory prior to, or even at a relatively early stage of, a qualitative study may preju- dice the researcher’s ability to see through the eyes of his or her subjects. Theory may constrain researchers excessively and blind them not only to the views of participants but also to the unusual and unanticipated facets of a strand of social reality.
(Bryman, 1992, p. 87)
For this study, the ability to make possible discoveries has been paramount from its outset. This is why its research problem has been wide from the start (problem areas on the human side of mergers and post-merger integration) and its research questions are general and have evolved over time. The purpose of this study
is not to solely provide a different way of studying mergers, but also to contribute to the understanding of mergers in terms of possibly enhancing the management of them. In comparison, for example, Risberg’s (1999) main purpose of studying acquisitions through the concept of ambiguity was
…to provide an alternative to traditional acquisition research, a different and new understanding of acquisitions and the post- acquisition process. (idem, p. 215)
Due to the focus on a new framework for research, she has to emphasise theoretical and methodological issues in her work.
The purpose of this study is not to provide a new framework for research; instead, the mergers studied are explored through the chosen research strategy and framework. This means that the focus is on the cases and the analysis of them in this study. In light of this study’s method, purpose and its focus on empirical data, it can be considered representative of ‘grounded theory’ as introduced by Glaser in Strauss in 1967: discovery of theory from data obtained from social research through its careful analysis. ‘Grounded theory’
is viewed as an overall objective of research, which can be obtained through the use of various research strategies and methods. The underlying understanding of a theory is that it is an ever devel- oping entity, i.e. a process, not a perfected product of research.
(Glaser and Strauss, 1967)
According to the paradigmatic point of departure adopted in this study, science creates ideas that are dependent on the con- text in which they are produced. Therefore, they are relative to a particular frame of reference. In order to present the ideas of this study, it is therefore vital to present the employed frame of refer- ence. Only within its context will ideas be of value. An account of the frame of reference of this study shall be provided in the next section of this chapter.
FRAME OF REFERENCE IN THISSTUDY, a number of terms and concepts are used.
A clear definition of how these concepts or terms are employed is important in order to ‘set the stage’ for what will follow later.
Approximating terminology constructions seems to be a very human trait we keep occupying ourselves with. Behind construc- tions, i.e. terms or names, there do not seem to lie any exact, demarcating entity. Thus the definition of different terms could be seen as verbal constructions creating meaning. Without this kind of ‘naming’, the world would not be intellectually comprehensible or ‘discussable’. (Gustafsson, 1994) As organisational phenomena, mergers and post-merger integration, are examined in this study, the terms organisation, merger and post-merger integration and their use need to be clarified. Further, the ‘human side’ of mergers is the focus of attention, so what this concept comprises will have to be defined. As the explicit focus in this study came to be the concept of ‘expectation’, the use of this term in this study will need to be explained as well.
ORGANISATION
In this study, an organisation that is of the profit generat- ing kind, characterised, among other things, by having owners, customers, employees, managers etc., has been the contextual object examined. An organisation is viewed as consisting of people, as being created by people and as being created for people. Thus people are at the centre of the perception of and the interest in the organisation as a phenomenon as well as the concept of ‘organis- ing’. (cf. e.g. Risberg, 1999)
Smircich (1985) points out that the study of any kind of organisational life always carries the process of organi-sing con- ducted by people as its focus. This makes the study of organisa-
tions the study of ‘organisation making’ as the researcher interprets, decodes and deconstructs systems of meaning for an organisation.
The question underlying this quest is ‘what is going on?’ or ‘what is happening here?’. (idem) ‘Organising’ is something that is done by all organisational members continuously, not only leaders or experts in organising or organisation. Even if terms like plan- ning, managing or arranging are used, some form of organising is always occurring in an individual’s life. (cf. Löwstedt, 1995b) The organisation can be viewed as a social construction in terms of its
‘origin’ (as an on going process of ‘successive adaptation’), but also in terms of being a consequence of people’s conceptions or ideas of the organisation. (cf. Löwstedt, 1995a)
According to Sjöstrand, (1998) a reason for human orga- nising descends from the perceived achievement of ‘collective ben- efits’ for individuals. Another could be found in the area of seeing the human being as a social creature, who finds value and mean- ing in the mere social contact with other human beings, (idem) as insecurity and uncertainty are argued to be the main driving forces behind the need for social interaction. Fundamentally, this value could be created through the experienced creation of security. (cf.
Berger and Luckman, 1995) In this sense, Sjöstrand (1998) defines an organisation as an ‘artificial arena that is dynamically defined by people’s continuous and innumerable interactions.’ (idem, p.
35, transl.) The organisation as such is a consequence of interac- tions between people and the shared perception of the experienced course of interactions; a ‘descriptive sediment’ that can manifest itself in many ways. (ibid.)
As Gustafsson (1994) points out, however, the study of organisations and business is highly focused on the individual, constituting the object of study. Also the organisation or com- pany can thus be individualised, as an individual decision making unit. The unit can be the leader of the organisation, but also the organisation as a whole can form a unit in this sense. (idem.) Is a company or a sub unit of a company at any one point in this study
mentioned as an actor in its own right, it should be viewed in this light. The strongly engraved view of organisations as being made up of people mentioned above should excuse the perception of an organisation being an ‘actor’ in its own right.
MERGER
The terms merger and the related organisational changes called takeover and acquisition can pose problems in an organi- sational change because, shortly put, they are ascribed different contents and organisational behaviour. (Frommer, 1998a) This evidently necessitates defining the core terminology used in this (or any other) context in order to clarify communication and meaning.
Within theory on the subject of mergers in general, the subject is mostly referred to as ‘mergers and acquisitions’ and oftentimes replaced by the acronym ‘M&A’. In this study, the term merger is used instead of ‘mergers and acquisitions’. This has two reasons. For one, it is shorter. Secondly, the organisational changes that have been studied empirically were called mergers, so it seems natural to stick to that term.
In this study, the term merger is employed in its meaning of being the combination of two organisations so that only one company survives as a legal entity. Basically a merger can be seen as an exchange of existing assets in that one company pays for the assets of another. (Golbe and White, 1988) What distinguishes the merger from an acquisition or a takeover is the fact that the deal is done on a basis that is mutually agreed by the organisations’
respective management and approved by their shareholders. Thus the term merger stands for the varying ways of combining two or more organisations, given the contractual feature mentioned above. Also, Burke’s (1987) perception of a merger and the fol- lowing post-merger integration as a process rather than an event is employed. Gertsen et al. (1998) argue that mergers are co opera-
tive agreements between equal partners, whether accomplished by the transfer of assets to one surviving company or by joining two companies to form one new one. Thus, a merger is considered to differ from an acquisition in terms of the nature of the ‘legal transaction’ undertaken. Gertsen et al. (idem) find this distinction significant enough to state that a merger is not quite identical to an acquisition. One should bear in mind that the distinction is of a purely contractual or legal nature and does not diminish the fact that also in mergers, companies or parts of companies are being bought and sold.
The problems the term merger as opposed to acquisition or takeover or even joint venture can pose in this sort of an organi- sational change will be discussed below in the analysis of the cases presented in this study.
MERGER SUCCESS
Success and failure are almost unavoidable themes in the context of mergers and acquisitions. (Vaara, 1995, p. 7)
The success and failure of a merger seem to be such
‘unavoidable’ issues in conjunction with mergers because the impact of a merger is evidently substantial. (cf. Vaara, 1995) The justification of a merger seems necessary in terms of its success or failure, in order to ‘justify’ its financial and other costs. Another reason for the ‘unavoidability’ of this topic is that merger success seems to be an ambiguous issue; mergers often seem to be perceived as failed and generally seem to be experienced as troublesome and difficult. On the other hand, they are continuously sought after and implemented. (cf. Cartwright, 1998) Further complicating the issue is, as Napier (1989) states, that there are no ‘set rules’
pinning down merger success.
As Bild (1998) for example points out, internal follow up of mergers characterised by a higher degree of integration is
complicated by the increasingly indistinguishable cash flows. In addition, mergers are interwoven with external occurrences and circumstances, which complicates the separation of merger related characteristics from non-merger related factors the organisation encounters. Salter and Weinhold (1988) point out that there seems to be more evidence of the short term effects of acquisi- tions than of their long term benefits. Short term observation of merging companies’ stock prices alone may, as Nahavandi (1987) points out, not have many stakeholders in the involved companies gaining much from a merger except possibly short term investors playing the market. Also Trautwein (1990) argues for a shift from pure stock market measures towards measuring the actual perfor- mance of companies in order to gain a more complete picture of the motives and justifications for mergers. Decision making and strategic context would thus be included in an analysis, e.g. a merger’s contri-bution to a company’s overall strategy. Addition- ally, mergers should be evaluated not only in terms of monetary value, but also in terms of non economic value, such as job secu- rity, career aspects or organisational affiliation. (Haspeslagh and Jemison, 1987)
The consequences of mergers and their evaluation seem to depend on the ‘stakeholder perspective’ to some extent. (cf.
Sundarsanam, 1995) Perspective seems to be the key in the over- all assessment of success or failure of any endeavour; Gustafsson (2001) highlights this with the example of the Sydney Opera House. If one takes a ‘project management perspective’ and focuses on the project budget as it stood at the very beginning of the Opera House’s construction, this endeavour can most definitely be viewed as having failed. The cost of this construction project exceeded its initial budget considerably. On the other hand, if one is to take the perspective of furthering tourism and the fame of Sydney (and Australia), i.e. an ‘Australia promotion’ perspective, then the whole endeavour can be considered a success, as there are not many (modern) buildings in the world that have reached the
level of fame the Syndey Opera House has. The whole discussion around success and failure is thus, according to Gustafsson (idem), an ‘intentionalistic discussion’. The question of success or failure has to be viewed in relation to a taken for granted intention (or several, serial intentions). Only if one has had a specific intention to start with, can one succeed or fail. And the notion of success or failure is only assessable in relation to this intention. (idem) Regarding the success or failure of mergers, the underlying, initial intention behind the merger has thus to be taken into account.
What complicates the situation in mergers is that the intentions behind mergers evidently are complex and depend on the view- point taken. This is why the ‘stakeholder perspective’ seems crucial in this matter. For example, Vaara (1995) points out that success and failure are individual, subjective experiences.
In this study, the concept of merger success is referred to as exactly that; an individual, subjective concept depending on point of view and understanding and comprises a merger in its ‘larger sense’, i.e. including post-merger integration. However, the con- cept of merger success or failure seems to carry ‘collective’ features, evidently not only among practitioners, who at least in the inter- views conducted for this study talked about merger success with- out further defining it, unless asked. Also within merger related research, the term is frequently not given a detailed definition. The collective dimension to merger success and merger failure seems to lie in two main distinctions or ideas on what it is about;
1. ‘as a business measure supposed to generate benefits’ (synergy, profitability)
2. ‘as a business measure supposed to look in a certain way’ (integration, behaviour)
These two distinctions within merger success and failure seem to be present whenever these merger evaluation related fea- tures are at focus.
